QUESTION: Commissions and costs: why does ETF TER matter in the long run?
Answer
The term TER stands for Total Expense Ratio and represents the total fee that the management company charges for managing ETF assets. Over a long investment horizon, this indicator plays a crucial role in shaping your final capital due to the power of compounding.
For successful long-term work with exchange-traded funds, it is recommended to use a proven systematic scheme of actions.
•Determine the current point of your financial condition and fix the volume of capital that you plan to regularly direct into funds.
•Set a clear success metric, including the target portfolio return minus all management expenses.
•Choose investment instruments with the lowest TER among similar offerings on the market.
•Set a strict deadline to achieve intermediate and final investment goals.
•Automate regular actions to purchase selected assets to minimize the emotional factor.
Even a small difference in fund fees of hundredths of a percent over ten or twenty years can reduce your final profit by a significant amount. This is precisely why investors focused on passive income and long-term capital accumulation carefully study the TER structure of each chosen exchange-traded fund before purchasing it.
Was this answer helpful?